Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

Morgan Stanley Sinks Carnival Shares

Does this analyst make a good case? Or is it just more noise from Wall Street?

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Share of Carnival (NYSE:CCL) sank 5% today after Morgan Stanley downgraded the cruise line operator from equal-weight to underweight.

So what: Along with the downgrade, Morgan analysts reiterated their price target on the stock of $32 per share, representing about 7% worth of downside to yesterday's close. Carnival posted market-topping third-quarter earnings yesterday, but weak forward guidance implying a sluggish yield recovery and cost increases prompted Morgan to make the call on valuation concerns.

Now what: Morgan now expects Carnival to earn $1.60 per share in 2014, representing a 28% cut to its previous view. "Once again, investors need to look at least two years out to make the shares look cheap, assume a perfect recovery, and that there are no 'structural' issues causing the ongoing downgrades," wrote Morgan analysts in a note to clients. Of course, when you consider Carnival's still-massive debt load, the risk/reward trade-off looks even less appetizing.